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Food Price Policy in an Era of Market InstabilityA Political Economy Analysis$

Per Pinstrup-Andersen

Print publication date: 2014

Print ISBN-13: 9780198718574

Published to Oxford Scholarship Online: January 2015

DOI: 10.1093/acprof:oso/9780198718574.001.0001

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The Political Economy of Food Price Policy in Nigeria

The Political Economy of Food Price Policy in Nigeria

(p.275) 13 The Political Economy of Food Price Policy in Nigeria
Food Price Policy in an Era of Market Instability

Aderibigbe S. Olomola

Oxford University Press

Abstract and Keywords

The food crisis of 2008 in Nigeria was influenced by price changes in the world market and the escalation of the price of imported fuel into Nigeria which led to sharp increases in the prices of agricultural inputs and transportation cost. The soaring prices of food staples benefited the producers whereas there was a worsening of malnutrition among the poor. To cushion the effects within the short-term, the government released grains from the reserve, ordered the import of half a million tonnes of rice to be sold at a subsidized rate and suspended the tariff on rice imports. The short-term price reduction could not be sustained, however, due to food supply shortages, weakness of the Nigerian currency, and the poor implementation of projects.

Keywords:   Nigeria, agriculture, food price, food subsidy, import bans, government response

13.1 Introduction

Nigeria is a net importer of food. Therefore, any crisis that occurs in the international food market will be felt in Nigeria. It is in the context of the international dimensions of the 2008 food crisis that the nature, impact, and policy responses in Nigeria can be understood. Although the prices of many commodities slumped during the first couple of years of the new millennium, some commodities (coffee, cotton, sugar, rubber, cocoa, rice, etc.) started to witness a rebound thereafter. The main causes include the shifting fundamental trends in supply and demand, poor harvests, policy changes, episodic shocks arising from climatic fluctuations, and a variety of other natural and political factors. As in 2006, the increases in commodity prices in Africa were regarded as a commodity boom being driven by growth in other developing countries, especially China and India, influence of taste and preferences, climatic fluctuations, conflicts in crop producing countries, high energy costs, and price speculation (Olomola 2007). By 2008, however, the price rises have assumed crisis dimensions in food markets across the developing world, including Nigeria. The crisis actually came to a climax during the first three months of 2008 and the implementation of policies to mitigate the effects started during the first week of May.

In Nigeria, the crisis followed a period of renewed growth in the agricultural sector and the concerted effort to modernize the sector. Thus, initially it was felt that since there was no food scarcity of any significant proportion the food crisis could be regarded as mere media propaganda. On the realization of the fact that Nigeria is a net food importer and that a price escalation would reduce access to food for the majority of the people who already were (p.276) precariously food insecure, the government made frantic efforts to address the situation. But what prompted the government to agree to take actions? What is the impact of the food crisis in Nigeria? What measures were adopted by the government to reduce the impact? Why did the government respond the way it did? How effective were the policy responses? What lessons can be drawn to forestall or to remedy the situation in case of future occurrence? These are the issues being unravelled in this chapter. Specifically, the objectives of the chapter are to (i) examine the agricultural commodity price trend and determine the effects of the 2008 food crisis in the country; (ii) identify the types and time horizon of the policy measures adopted to address the food crisis; (iii) analyse the political economy context of the policy responses in terms of determining the role of key actors and the factors circumscribing the adopted policies; (iv) analyse the dynamics of decision-making among the various actors in the policy process; and (v) assess the socioeconomic consequences of the policy responses.

From the analysis of data gathered through interactions with policy makers and major stakeholders and from official documents, we found that price transmission internationally and within the local supply chains played a considerable role in the food crisis. The nation faced severe shocks arising from sharp and simultaneous increases in the international prices of food and crude oil in 2008. Critical supply shortages arising from inclement weather conditions, investment-unfriendly macroeconomic environment, and poor implementation of projects exacerbated the price transmission effects. The supply response demonstrated by farmers was clear and remarkable. Younger farmers were attracted to the agricultural sector.

However, consumers were worse off. Those on low incomes witnessed a substantial increase in the proportion of their income that was spent on food. There was also deterioration in their intake of calories and protein as they engaged in unhealthy food consumption patterns. The government—executive and legislature—farmers’ associations, and other stakeholders including the mass media rose up to the challenge and came up with some policy actions to remedy the situation. The measures included (i) a release of grains from the strategic reserve at appropriate intervals to mitigate the impact of high food prices on consumers; (ii) the provision of the sum of NGN 80 billion (US$712 million) for the import of 500,000 metric tons (MT) of rice from Thailand and other parts of the world within five months to be sold locally at a subsidized rate; (iii) some adjustments in tariff measures on food import to ease transaction; and (iv) a campaign to sensitize Nigerians to the looming dangers of food shortage and the need to conserve food.

These responses generated mixed effects. In the short term it was possible to reduce the spike in food prices and to introduce a guaranteed minimum price as a safety net to stabilize producers’ income. But the release of food (p.277) from grain reserves was badly managed as were the financial innovations for agricultural commercialization. The initial momentum in the implementation of projects was lost along the line and some of the projects were uncompleted due to the lack of commitment to release funds on a timely basis.

13.2 Food Price Trends and Shocks

In spite of production variabilities and fluctuations in prices and weather conditions, the country has not witnessed famine or food riots; neither has it been a beneficiary of food aid. Thus, the soaring food prices and the accompanying hysteria witnessed in 2008 seem to be unprecedented. It is, therefore, not surprising that it took some considerable controversy before the soaring food prices of 2008 could be considered as a food crisis. In general, the prices of many commodities have followed an increasing trend but skyrocketed between 2007 and 2008, especially in the case of rice, sorghum, cassava, soybean, maize, millet, and wheat. Even after 2008, prices of many crops continued to rise with the exception of rice (Figure 13.1).

The Political Economy of Food Price Policy in Nigeria

Figure 13.1 International wheat price transmission in Nigeria

Source: author’s illustration using data from NBS (2011).

The continued rise in prices beyond 2008 is partly due to demand pressures from neighbouring countries as Nigeria’s importance in regional (cross-border) trade in the Sahel region became more prominent in terms of its involvement in ensuring food security through export of dry grains such as millet, maize, and sorghum. For instance, in the aftermath of the production shortfall in Niger Republic in 2009 which degenerated into a demand-supply gap of about 400,000 tonnes of grains, exports from Nigeria effectively bridged the gap and helped to stabilize prices. An assessment of the situation as at February 2010 shows that between 80 and 100 per cent of markets in Niger Republic were supplied each week with about 4,300 tonnes of grains from (p.278) Nigeria, 1,750 tonnes from Benin, and 240 tonnes from Burkina Faso and this continued until around August that year (Diao 2010).

The fact that the prices of various commodities like rice, sorghum, cassava, soybean, maize, millet, and wheat surged between 2007 and 2008 irrespective of whether they are tradeables or non-tradeables is an indication of the complex nature of the drivers of the food price crisis in Nigeria. Ordinarily the international market prices of rice and wheat could be held responsible for the soaring prices experienced during the period. The fact that the prices of other commodities were rising at the same time, however, suggests that other factors might also be contributing. In this regard, there are three possibilities. First, sorghum, millet, and beans could face a higher regional demand as neighbouring countries and other West African countries where food riots have been reported might be sourcing the food staples from Nigeria as mentioned earlier, thus transforming their trade configuration as they gained entry into the region formally or informally. The possibility of cross-border trade in the case of sorghum, millet, and beans cannot be ruled out. Second, is the substitution effect of the 2008 food crisis. Consumers in Nigeria and indeed in many West African countries turned from the consumption of rice and bread to the consumption of other food staples such as cassava products, yam, and maize; a trend that has been observed in Guinea, Liberia, Sierra Leone, Ghana, Benin, and Nigeria together with an increase in the production and trade of cassava farina in West Africa since 2008 (NISER 2009; SWAC 2011). The third possible source of price increase is the high cost of transportation in Nigeria during the period, particularly occasioned by the increase in the international price of petrol occurring simultaneously with the soaring of international prices of rice and wheat. As Nigeria was also importing fuel during the same period, such increase in the price of petrol would be transmitted to the domestic economy leading to an escalation of transportation cost.

13.2.1 International Price Transmission

Graphical illustrations of the co-movements between the import prices and domestic retail prices of the commodities for annual data from 2002 to 2010 show strong evidence of transmission of international prices (Figures 13.113.3). Furthermore, a correlation analysis reveals that the co-movement is strongest in the case of wheat (r = 0.84), followed by rice (r = 0.70), while in the case of maize, the movement is also in the same upward direction, but the correlation is weak (r = 0.37).

The shock in world food prices in 2007–8 should be expected to generate extraordinary effects because the rise in prices coincided with sharp increases in the prices of petroleum products (including petrol) imported into Nigeria which followed the same trend as the price of crude oil in the international (p.279) market. Prices of refined petroleum products, fertilizer, and other agricultural inputs imported into the country increased, resulting in a substantial rise in prices of both imported and domestically produced food.

The Political Economy of Food Price Policy in Nigeria

Figure 13.2 International rice price transmission in Nigeria

Source: author’s illustration using data from NBS (2011).

The Political Economy of Food Price Policy in Nigeria

Figure 13.3 International maize price transmission in Nigeria

Source: author’s illustration using data from NBS (2011).

The weak exchange rate which continued to depreciate up until 2010 also fuelled the hike in food prices especially in view of the fact that the country is highly import-dependent for the supply of its agricultural inputs. In Nigeria, the Nigerian naira (NGN) exchange rate to the US$ continued to depreciate from 2005 to 2010. It was NGN 132.9 in 2005, NGN 137.4 in 2007, and NGN 139.27 in 2008. It depreciated further to NGN 148.9 in 2009 and NGN 150.3 in 2010. Moreover, the inflation rate which stood at a single digit before the crisis, rose considerably from 6.6 per cent in 2007 to 15.1 per cent in 2008 and 12 per cent in 2009. To date, the inflation rate has not reverted to the pre-crisis single digit. The domestic inflationary pressure, inadequacies of the foreign currency market and imported inflation through massive imports of (p.280) petroleum products (which jerked up transportation and production costs) were partly responsible for the food price crisis in Nigeria. This situation also partly accounts for the observed trend in which domestic food price increases actually exceeded world food price increases.

Apart from the transmission of international prices there are other factors which accounted for the soaring of food prices in Nigeria from 2008 to 2010. They included food supply shortages, macroeconomic environment with high interest rate, the weakness of the Nigerian currency, poor implementation of projects, as well as high transportation cost.

13.2.2 Broad Impact of the Price Shifts on Stakeholders

Production Impact

Although the small-scale farmers may not be able to fully capitalize on price rises due to limited access to markets and key production inputs such as seed, fertilizer, knowhow, irrigation facilities, and credit they are still expected to be encouraged to increase production in response to the rising product prices. The production trend for major commodities from 2004 to 2009 increased (Figure 13.4), varying widely among commodities. There is continuous expansion in the production of cassava and yam even up to 2009. The rice producers have not increased output significantly and this resonates with the unimpressive price regime in the aftermath of the import of rice in 2008 which effectively reversed the upward swing in price and dampened farmers’ enthusiasm to cultivate the crop during the following cropping season. The slight production increase has been spurred by incentives provided by the government in the form of credit facilities and availability of modern inputs.

The Political Economy of Food Price Policy in Nigeria

Figure 13.4 Production trend of food staples in Nigeria, 2005–9

Source: author’s illustration using data from Federal Ministry of Agriculture and Rural Development (2010).

(p.281) Effects on Food Consumption Patterns

The effects of the 2008 food crisis on food consumption can be gleaned from the study conducted by Nigerian Institute of Social and Economic Research (NISER) (2009) which examined the budget share various food categories consumed at homes across the six geo-political zones in the country. The study revealed that cereals, root, and tubers as well as vegetables account for a larger share of the total food budget in both the rural and the urban sector. On the other hand, the budget shares of meat, fish, and beverages are smaller. The high food prices changed the share of food budget in favour of cereals in both the urban and the rural sectors. Similarly, between 2007 and 2008, the results show an increased share of roots and tubers in the food budget in some areas (NISER 2009). The share of meat and beverages in the food budget declined between 2007 and 2008 in most of the zones. Household expenditure on food increased from around 50 per cent in 2007 to about 75 per cent in 2008.

13.3 Policy Responses to the Crisis

In Nigeria, the policies adopted can be categorized into short-term, medium-term, and long-term policies. In what follows we present details of the various policies.

13.3.1 Short-term Measures

Release of Grains

The federal government released 65,000 MT of various grains and garri to the public, which led to a reduction of prices of some tradable and non-tradable food items such as maize, sorghum, millet, and garri. The states were enjoined to do the same but this took place at an insignificant level given the low stock levels. The intervention buying operation of the federal government was aimed at increasing the supply of rice within the next three months (May–July 2008) and sustain it for the following three months in the first instance (August–October 2008). This was expected to cause a significant reduction in the market price for rice, based on evidence that it had risen much faster than the current price at the border with Benin Republic. The incremental import would be sold to the general public at a subsidized price, with a view to bringing the price down.

Mopping up Operation

This involved purchasing the current stock of imported rice in the country from local stores in different parts of the country. It was established that about 110,000 MT were available to be mopped up at the prevailing market (p.282) price to be sold to the consuming public at subsidized prices. Although this was achieved within the short term, the quantity available was too small to generate any perceptible impact.

Distribution of Small-scale Machines

The government considered the option of processing the paddy in storage based on the quantity confirmed to be available. Rice Farmers Association of Nigeria (RIFAN) had claimed that about 4 million MT of paddy would be available in the short term, comprising present stock level in July 2008 (2.5 million MT) as verified by the Federal Ministry of Agriculture and Water Resources (FMAWR) plus new harvest (1.5 million MT) in the following season in October 2008. However, the problem of processing was underscored, in terms of low capacity of small-scale processors and poor quality of domestically milled rice in Nigeria. Thus, small-scale machines could be distributed to processors in the short run for the purpose of milling the paddy to be made available in October 2008. Therefore, the government made an attempt to place an order for small-scale rice processing machines from abroad. About 1,000 small-scale milling machines were to be purchased which would need one month to install in all parts of the country. This was expected to reduce the rice price by at least 30 per cent. It was also to have favourable socioeconomic implications including creation of jobs for processors, engineers, and others. The fact that farmers would be encouraged to produce rice made this option particularly attractive. The option did not go beyond the level of conceptualization. It failed as a short-term measure because about two or three months would be required for the import of machines and putting up the factory buildings.

Tariff Waivers

The federal government approved the suspension of all levies and duties on rice imports with effect from 7 May to 31 October 2008, which stimulated the private sector to place an order for rice import to the tune of almost 10 MT. The actual rice import was only 172,518 tons, which led to a 45 per cent fall in prices. In addition, the cross-border trade in rice probably increased. The socioeconomic implication was in terms of increased business among rice traders and consumers in the short run, which of course was at the expense of low morale of farmers in the long run.

13.3.2 Medium-term Measures

Subsequently the ordeal of soaring food prices was converted to an opportunity for Nigeria to institute medium- to longer-term measures for improved agricultural development. Thus, the federal government set up an (p.283) implementation committee comprising ministers of agriculture and water resources, finance, commerce, and industry. A number of medium-term measures emerged to address the looming food crisis.

Food Production

An allocation of 1.68 per cent of the federal budget was made to the Natural Resources Development Fund during 2008–11 for boosting the domestic production of food crops, the development of the agro-allied industry, and research and development (R&D) on seed varieties. As discussed below, not all the amount was actually spent due to bureaucratic delays and untimely disbursement of funds.

Agricultural Credit

NGN 10 billion was made available from the rice levy account as a credit scheme at a concessionary interest rate, in support of the local rice processing capacity in the country. However, many small-scale producers and processors could not access the funds. A major complaint was that the selection of beneficiaries was politically motivated. Furthermore the Central Bank of Nigeria resolved to raise NGN 200 billion funds from the commercial banks in two weeks. The fund would be used for commercial agriculture to be disbursed by accredited banks. The credit under the scheme was to be disbursed for crop and livestock production, the processing and marketing including storage and input supplies. The commercial agricultural credit scheme was not targeted at financing the establishment of rice mills. Thus, despite the introduction of this scheme the issue of inadequate rice processing mills remained unresolved. The implementation of the scheme was inequitable as small-scale farmers who produced over 80 per cent of the agricultural output in the country received little or nothing from the credit scheme while large-scale producers benefitted immensely. Smallholders also face far more restrictions in terms of access to formal credit than the large-scale farmers.

Food Reserve and Storage Facility

The federal government decided to complete the outstanding storage projects before the end of 2008 in order to increase the national strategic food reserve capacity from 300,000 to 600,000 MT. The state governments were encouraged through moral suasion to step up their buffer stock operations, which involve at least 10 per cent of food output in their respective domains. It was envisaged that up to two million MT silos capacity would be required for the country. Efforts were made to complete seventeen silos which were already at various stages of completion across the country. The federal government also decided to start up the building of eleven others in various states of the (p.284) country. A sum of NGN 15 billion was earmarked for this purpose. To date, however, many of the silos remain uncompleted and the target capacity has not been met due to poor budget implementation especially non-release of appropriated funds.

Crop Processing

A decision was taken by the government to increase the rice milling capacity by an additional 88,000 MT per annum and create about 8,000 direct and indirect job opportunities. The mills were to be located in the major rice producing states to take advantage of proximity to raw materials. The local capacity for the operation and maintenance of rice mills and the fabrication of spares was to be gradually built thereby creating employment for youth. Commitment to this decision seems to remain on course. The federal government is making arrangements to secure international financing for the establishment of a hundred rice mills across the country. The target date for the completion of the project has been put at 2015. As it turned out, the issue of importing rice processing equipment which failed as a short-term measure has been shifted to the medium-term horizon and even then it has been difficult to achieve mainly due to scarcity of investment funds and the lack of confidence on the part of private investors that the policy environment will protect their investment if they provide the necessary funds. There was also emphasis on the physical development of markets for livestock and birds, physical development of grain markets and the introduction of a guaranteed minimum price (GMP) scheme. This is to serve as a safety net measure for the farmers in terms of providing remunerative prices and stabilizing their income. The GMP was actually introduced but its implementation has not been effective.

13.3.3 Long-term Measures

Later in 2009, the federal government produced a food security strategy document which prioritized a number of measures in the long term. The policy thrust behind this includes a number of desirable attributes, namely the value chain approach to agricultural development, commodity focus in providing support to producers, the visibility of the private sector, successor farmer generation, and provision of safety net. In this regard, the aspects of the policy response in the long term include (i) the promotion of large-scale commercial agriculture of between 500 and 3,000 hectares (ha) that is intended to have a direct linkage to the small-scale farmers with a target of 10,000 ha for a period of four years; (ii) the construction of 60 specialized warehouses that will increase storage capacity; and (iii) the setting aside of 1.68 per cent of the Natural Resources Fund for agricultural research.

(p.285) 13.4 Political Economy Context

The 2007–8 food crisis was widely reported by the Nigerian mass media and this generated responses from all strata of the society—the executive, parliament (National Assembly), non-governmental organizations, producer associations, development partners, scholars, and activists. This section examines the actual policy process that took place, the actors involved, their roles, and the type of links and interactions among them as well as the timing of responses and the factors influencing the adopted policy actions.

13.4.1 The Policy-making Process

A diverse group of stakeholders (government, donors, research community, farmers’ associations, media organizations, and the private sector) was involved in the debate surrounding the food crisis and policy responses in Nigeria. The policy-making process did not follow the conventional linear model with a unidirectional flow from an agenda setting phase to the decision phase and implementation phase which actually had been flawed in the literature (Sutton 1999). A major characteristic of the food crisis policy (response) process is that it involved the participation of a variety of stakeholders dominated by the government (policy makers), politicians, the mass media, and producers’ associations. The policy process can best be described as one of disjointed incrementalism or muddling through (Lindblom 1980). Indeed, muddling through a ‘time bomb’ which never exploded offers an intriguing experience. Discussions about the nature of the crisis and possible solutions were going on simultaneously but a considerable length of time was taken to build consensus. It was difficult for the stakeholders to promptly prescribe the policy agenda because of the political colouration and connotation implied by the controversy surrounding whether or not Nigeria was actually facing a food crisis. As the price hike was becoming increasingly burdensome for consumers and food supply shortages were being reported and intensively analysed in the media, the National Food Reserve Agency (NFRA)—a more or less technical arm of the Federal Ministry of Agriculture and Water Resources (as the ministry was then known) claimed that the country was not facing any risk of food crisis. This position was unpopular in the country and took some time before it was reluctantly vacated. It effectively created a lull in policy response and put the executive arm of the government on the defensive rather than staying at the forefront to study the situation properly and provide the rallying point to set the policy agenda to tackle the crisis. The government was later to be stampeded by criticisms from opposition parties (politicians), civil society organizations, and media reports of the dire consequences of (p.286) soaring food prices in other countries including deadly riots and threats to the stability of governments.

Consequently, the process witnessed the pronouncement of decisions by the government even when consensus had not been reached and hurriedly identified solutions which turned out to be unimplementable within the stipulated time. Such a panicky process was exemplified by the initial announcement of the direct import of rice to the tune of NGN 80 billion. The basis for this was the fear that the soaring food prices in the world market could introduce significant shocks into the Nigerian food market, given the status of Nigeria as a net food importer wherein rice and wheat predominate among others in the food import bill of US$2.8 million per annum. Following sharp criticism by RIFAN and opposition parties the policy had to be moderated by another commitment of NGN 10 billion for the provision of credit to farmers to boost food production. This way, the government was able to assuage the apprehensions of both consumers and producers. This is a demonstration of the fact that producers’ associations could have a significant influence on the policy processes. The government continued to muddle through the process but had to work out incentives for the benefit of producers in tandem with what the consumers will benefit from cheap imports of rice. Another example was the attempt the government made to import small-scale rice processing machines to be installed within one month in all parts of the country. The idea failed when it was later realized that the process of importing and putting up the factory buildings would require up to three months. Further details of what worked and what else failed to work can better be understood as we characterize the process by examining the role of the decision-making actors as well as the stakeholders who influenced the process, timing of responses, policy choices and effects, as well as the factors that circumscribed the selection of policies implemented.

13.4.2 Decision-making Actors

Leadership Role of Government in Setting the Agenda

Of the three tiers of government in Nigeria (federal, state, and local) the federal government maintained the leadership role in organizing and implementing policy responses to the 2008 food crisis. And in the same vein, the executive and legislative arms of government played prominent roles. The response of the executive arm of government (led by the president) came mainly through the FMAWR while in the National Assembly (parliament), the House of Representatives and Senate organized public hearing, debates, and investigations through their respective committees on agriculture. The FMAWR was the fulcrum around which the policy process revolved. It has the responsibility to liaise with other stakeholders including the parliament, (p.287) the Federal Executive Council (FEC), the private sector, farmers’ associations, and development partners, package the policy measures for necessary approval by the government and implement such policy response measures. During the period, approval of executive actions followed the normal procedure in which the FEC comprising all cabinet ministers and chaired by the president, examines the policies brought before it by the relevant minister and arrives at a consensus after thorough consideration of the merits and demerits.

As part of the consensus building process, the minister of agriculture convened a stakeholders’ meeting which took place at Abuja on 3 May 2008. The stakeholders in attendance included directors of various departments in the Federal Ministry of Agriculture, representatives of the National Food Reserve Agency, Agricultural Research Council of Nigeria, development partners, representatives of agribusiness firms, and the Rice Farmers’ Association of Nigeria. The agenda of the meeting was to examine the food situation in the country and to obtain the commitment of stakeholders towards implementing the proposed policy decisions. The sole objective of the policy response in the short term was to bring the domestic price of rice down quickly having jumped by about 100 per cent in a couple of months prior to that time. It was established that the rice output in 2007 was 3.4 million MT out of which only 1.4 million MT was milled leaving 2.0 million MT of rice paddy unprocessed because of inadequate processing capacity. It was also established that the requirement of the country for paddy rice for its 140 million people at 30 kg per caput consumption was 6.5 million MT or 4.2 million MT milled rice equivalent at 65 per cent recovery rate; and that the harvest of paddy in 2008 was estimated at 3.94 million tonnes.

The timing of the legislative and executive actions taken between October 2007 and November 2008 in response to the crisis attests to the role of both houses of parliament (Senate and House of Representatives) as policy champions (Table 13.1). The legislature demonstrated a better understanding of the problem and wielded considerable influence in setting the policy agenda and in ensuring effective delivery of services at the implementation stage. This was done through organizing public hearings and conducting debates to ensure appropriate policy implementation was neither delayed nor derailed.

Table 13.1 Policy process of the Nigerian 2007–8 food crisis response

Time line

Issues addressed and measures taken

25 October 2007

Through resolution No. 37 of 25 October 2007 the Senate alerted the nation to the drought in some parts of the country. This alert was mainly due to the devastating effects of droughts especially in view of the need to ensure national food security. The Senate further resolved that the Federal Ministry of Agriculture should immediately brief the house on the status of the nation’s strategic grains reserve. The strategic grains reserve is the mandatory storage by the Federal Government of about 5 per cent of grains harvested nationwide. This reserve is to ensure continuous availability of food even in the time of famine.

25 April 2008

The Committee on Agriculture of the House of Representatives alerted the federal government to the growing food shortages and the attendant soaring of prices of grains. The legislative chamber thereafter invited the Federal Ministry of Agriculture to a meeting to discuss in detail the status of food security in Nigeria.

29 April 2008

Based on the above articulated concerns the president convened an emergency meeting with all the 36 state governors to review the situation and take necessary actions. The meeting extensively discussed the food security situation in the face of the global food crisis arising from the shortage in the aggregate world food output and resolved that very urgent measures be put in place to protect the populace and develop the agricultural sector.

3 May 2008

A stakeholders’ meeting was convened in Abuja at the instance of the minister of agriculture. The agenda of the meeting was to examine the food situation in the country and to obtain the commitment of stakeholders towards implementing the proposed policy decisions.

14 May 2008

  • (i) the sum of NGN 10 billion be provided from the rice levy account for a credit scheme to support local rice processing capacity. Credit granted under the scheme was to attract 4 per cent interest rate, a repayment period of 15 years, and a five-year moratorium;

  • (ii) all outstanding food storage projects should be completed before the end of 2008 to significantly increase the national food reserve capacity from 300,000 to 600,000 MT;

  • (iii) the funds accruing to the Natural Resources Development Fund (May 2008 to 2011) be utilized as Special Intervention Fund Agriculture to boost domestic production of food crops and development of agro-allied industries as well as R&D for the production of improved varieties of seeds.

8–14 November 2008

In its annual retreat held in Kano (north west Nigeria) the Senate held sessions on ‘Desertification, Climate Change and Challenge of Poverty’ and ‘Ensuring Food Security in Nigeria’ as part of the key issues of concern during the retreat. The food crisis was widely discussed. The speakers and discussants at these sessions were distinguished academics drawn from various parts of the country. The whole nation was sensitized regarding the need to address the main causes of the crisis and the need for the government to take effective measures to address the crisis.

Source: author’s compilation.

A major political dimension in the policy process in Nigeria was the involvement of the thirty-six state governors as part of the key decision actors especially in view of the federal nature of the country with a multi-party democracy and multi-layered governance structure. All the governors met with the president on 29 April 2008 to examine the policy response measures. The following week, 5 May, the measures were tabled before the stakeholders for validation prior to presentation before the FEC (p.288) (p.289) for approval on 14 May 2008. Thus after the initial loss of time as mentioned earlier, the executive evolved a participatory process of taking decisions about the type of policy instruments to deploy in tackling the food crisis. Following the approval, the process moved into the implementation stage with the FMAWR being at the core of the administrative procedures. Even at this stage some of the key actors continued to play an active role in various ways.

Catalytic Role of the Mass Media

The mass media did not stop at drawing the attention of policy makers to the need to take urgent steps to address the soaring food prices. When the palliative measures were being implemented, a repentant NFRA urged the media to appeal to Nigerians to remain calm as the government was already taking measures to address the food crisis. The media monitored the process and reported cases of abuses and inequity in the distribution of grains that were released from the reserve. The parliament responded by setting up a panel to investigate all the issues involved. Other active participants in the decision-making process are the development partners who have to align their programmes and projects with the policy measures put in place by the government to tackle the food crisis.

Supportive Role of Development Partners

Many of the development partners started to address the consequences of the food crisis through the re-allocation of resources in existing programmes, the mobilization of new funds to ensure delivery of food assistance, nutritional care and support, supporting social safety nets for the most vulnerable groups, and the supply of seeds, fertilizers and other basic inputs to smallholders. The FAO, the International Fund for Agricultural Development (IFAD), United States Agency for International Development (USAID), the African Development Bank (AfDB) played crucial roles in this regard. In addressing the enormous challenges facing African agriculture and its major role in attaining the MDGs and poverty reduction objectives, the FAO took the initiative to mobilize key development partners in the establishment of Nigeria’s Food Security Thematic Group (FSTG).

The FSTG provided technical support for discussions and actions related to the soaring food prices in Nigeria including the development of the National Food Crisis Response Programme (NFCRP). By and large, the involvement of these agencies was largely in terms of strengthening their ongoing projects to achieve the medium-term objectives. They did not have any significant influence on the short-term measures taken by the government in response to the food crisis in 2008, neither were they directly involved in the design and implementation of the policy measures earlier discussed.

(p.290) Advocacy Role of Producers’ Associations

When the idea of importing rice to address the supply shortages was mooted, All Farmers Association of Nigeria (AFAN) and the RIFAN launched their opposition. They criticized the move arguing that it would be better to invest the funds in expanding domestic production. Some concerned members of the public even suggested massive imports of food to remedy the situation whereas representatives or sympathizers of food producers argued otherwise claiming that uncontrolled imports would dampen enthusiasm of farmers and constrict food production. The Association of Master Bakers of Nigeria threatened to stop the production of bread unless the price of wheat flour was brought down through massive imports of wheat. These arguments were going on up till May 2008 when the Federal Executive Council met to take the decisions highlighted earlier. The chairman of Lagos state chapter of the Association of Master Bakers and Caterers of Nigeria met with top government officials to ask them to reduce or cancel wheat tariffs or subsidize bakers but claimed to have received no response. The association therefore embarked on a one-week nationwide strike beginning from 5 May 2008 arguing that flour mills have been increasing their prices almost every week. The millers and government blamed the soaring price of flour on increases in international wheat prices. Many consumers supported the bakers’ grievances especially in urban areas where all dwellers consume bread virtually on a daily basis. A similar strike action by bakers took place in August 2007 after the government increased taxes on flour by 100 per cent. The price of bread then rose by about 25 per cent. Whereas the bakers’ association could not succeed in pressurising the government to subsidize the wheat industry, the AFAN and RIFAN were able to influence the government in setting up a NGN 10 billion loanable fund to boost rice production and processing capacity.

The producers’ associations were also not in support of a tariff waiver associated with the rice import policy. As the countdown to the 31 October 2008 deadline for the removal of the rice import duty waiver commenced, mixed reactions trailed the measure. Farmers’ associations and rice millers who were originally against the waiver continued to advance reasons why it should not be extended while traders and consumers who were in support continued to canvass reasons for its extension. Some state chapters of AFAN regarded the waiver as a disincentive to local rice production as it has deprived local farmers of the income to engage in rice production. It was claimed that the waiver had adversely affected local rice production and had further impoverished the country’s rice farmers. Besides, rice farmers from one state had to transport their produce to other states covering great distances for processing; a situation which has greatly discouraged local rice production. With regard to RIFAN some state chapters especially from the (p.291) north east argued that continued rice import was discouraging local production, adding that local rice farmers were unable to produce enough due to lack of credit facilities and low investments in the sector and that tariff waiver would compound the problem. They complained that even though the waiver was temporary, it has succeeded in rendering the local producers jobless and if sustained, it will destroy the local rice production completely. The rice millers were also against the policy, claiming that efforts should have been made to establish new mills given the critical shortage of milling machines in the country. The solution proposed by the farmers’ associations to address the food price crisis is that the government should empower domestic rice producers through the supply of improved seeds and other modern inputs. The only alternative to the waiver according to them is the provision of at least 50 per cent subsidy to local rice farmers for tractor hiring services and for the procurement of fertilizers and improved seeds. The government was not convinced by these views; the waiver was considered to be necessary when it was suspended in May and the suspension had to be lifted in October as scheduled. In the end the views of the policy makers and interest of consumers prevailed as far as the waiver policy was concerned. The policy was a short-term response in the interest of the generality of the consumers. The waiver was terminated as scheduled at the end of October after it had helped to reverse the dramatic price hike around the middle of 2008.

13.4.3 Key Decision-making Factors

A close observation of the policy process, its political, administrative, and social dimensions as well as the role of actors shows clearly that the internal considerations weighed more heavily than external factors in deciding which policy response measures were to be adopted. Given the fact that globalization can trigger the inflow of food crisis oppositions it is instructive for the government to take urgent steps to resolve the crisis. However, there are equally compelling reasons why the policy decisions had to be taken in Nigeria. Altogether, the decision-making factors are five-fold.

Rising Uncertainty about Food Security

It was recognized that the increase in price has the tendency to affect food adequacy as well as the accessibility and affordability of basic needs of Nigerian households. Arising from the global food shortage and soaring prices, food became an increasingly worrisome item in households’ budgets in Nigeria where it created rising uncertainties about food security. It was a very contentious issue because of its diverse consequences on different stakeholders in the country. Thus, how to cope with the global food crisis (p.292) and enhance increased access by consumers in both rural and urban sectors to adequate variety of food became a new challenge and concern of the Nigerian government.

Soaring Food Prices Can Further Impoverish the Masses of the People

In Nigeria, the rise in food prices is particularly worrisome because food price inflation hurts the poor most and it may have tremendous consequences on economic growth and poverty. Concomitantly, the public spending on the basic investments needed for agriculture and rural economic transformation has remained grossly ineffective and inefficient to bring about adequate food production. Agriculture is expected to form the fulcrum for the growth of the economy because it provides employment for about 70 per cent of the working population and has prospects for development by its size and spread. However, while agriculture has shown remarkable improvement, with a yearly contribution of nearly 42 per cent to the gross domestic product, poverty remains endemic and pervasive in the sector and in the country in general. To date, food insecurity remains a serious challenge to achieving the millennium development goal of halving the proportion of population who suffer from extreme poverty and hunger by the year 2015. A particular reason for concern about the impact of high food prices arose from the fact that the consumers’ income being spent on food has been rising with deleterious effects on the financing of children’s education and healthcare.

Need to Avoid Political Destabilization

The surge in food prices witnessed during the first three months in 2008 precipitated thunderous public discourse but there seemed to be no easy agreement on the best ways to resolve the issues. At the level of the executive, government actions were characterized by stampede and ad hockery with some of the panicky measures drawing criticisms from the media and the parliament from time to time. Understandably, an explosive food crisis was what the government could ill-afford at that time. The food crisis came at a point when the government in power was barely one year in office having been inaugurated on 29 May 2007. The elections that brought many of the political office holders to power were also being heavily contested in various election tribunals across the country. Clearly therefore, the government could not ignore the concerns being expressed in the media about the soaring food prices. The government had to muster the necessary political support and adopt a participatory policy process to provide interventionist measures to address the food crisis. This derives from the understanding of the lack of a cohesive action to stem the tide of persistent food insecurity and the concern (p.293) and discontent often expressed by the poor and highly vulnerable groups in this regard. It was felt that the food crisis has the potential to derail not only past achievements but ongoing pro-poor programmes aimed at reducing the incidence or breaking the cycle of poverty.

Unsustainability of Persistent Food Import

Decisions regarding the termination of a tariff waiver and a number of the medium-term and long-term measures were based on the fact that the country could not afford to continue with the level of food imports recorded during the period. This is in view of the requirement of foreign exchange for development in other critical sectors of the economy especially infrastructure and energy. Since reliance on import is not fiscally sustainable there must be efforts to boost domestic production hence not only short-term palliatives were decided upon but also medium- and long-term strategies were designed to transform and modernize the agricultural sector.

Phobia of Food Riot Contagion

Unpleasant consequences of the global food shortages have already been widely reported in many countries in terms of high prices of food, people eating less and less well, protests, strikes, and riots in the wake of dramatic rises in the prices of wheat, rice, corn, oils, and other essential foods. Furthermore, the food price shock has been destabilizing governments, igniting street riots, and threatening to send a new wave of hunger rippling through the world’s poorest nations. In Africa, fourteen out of fifty-three countries have witnessed mass disturbances following abrupt spikes in food prices in 2007–8. Some of the countries (Burkina Faso, Senegal, Guinea, Côte d’Ivoire, and Mauritania) are in West Africa. In February 2008, a severe riot also broke out over soaring food prices in Cameroon—a neighbouring country to Nigeria. If food riots in Egypt, Morocco, Tunisia, and Zimbabwe could be said to be far away, that of Cameroon was close enough to serve as a warning to Nigeria not to take the food crisis for granted. Thus, all the stakeholders agreed that the problem must be quickly nipped in the bud.

It could be puzzling to external observers why riots never broke out in Nigeria in spite of the price hikes and level of urbanization. The reasons are not far-fetched. First, Nigeria has no tradition of food riot comparable to other African countries and developing countries in other parts of the world. Second, Nigeria’s political landscape had witnessed considerable improvement since the return of democratic governance in 1999. Third, is the fact that Nigeria has been witnessing unparalleled press freedom for quite some time. The mass media in the country is one of the most unfettered in the world. Indeed, the media organizations have been providing (p.294) opportunities for stakeholders to express their opinions, especially on food security—thus making the alternative of street protest on food issues unattractive.

13.5 Conclusions and Policy Implications

The soaring food prices of 2008 have international and national dimensions. The transmission price effects were exacerbated by simultaneous increase in international oil price. The situation was complicated by food supply shortages occasioned by climatic fluctuations, investment-unfriendly macroeconomic environment and poor implementation of agricultural projects. The food crisis received considerable attention but inflicted notable impact on producers and consumers in Nigeria. The production trend for major commodities from 2004 to 2009 reveals that the impact on production is positive. There is also a positive impact on enterprise profitability as gross margin increased in 2008 in respect of all the commodities with the exception of millet and cowpea. In general, the consumers were worse off. The high food prices induced a change in the pattern of food consumption. For instance, there was a general shift in the share of food budget in favour of cereals in both the urban and the rural sectors in most of the zones. In terms of the effect on nutrition and food security we found that both the rural and urban dwellers consume less than the recommended minimum per capita daily protein and calorie intake implying worsening malnutrition among Nigerians in both the urban and the rural areas between 2007 and 2008.

A response policy was packaged to address the impact but the implementation yielded mixed results. The major problem which arose in the implementation of the short-term measures was the attempt to scuttle the flow of benefits by unintended beneficiaries. This was evident in the allocation of the grains released for distribution to various markets to cushion the effect of the price hikes. At the stage of implementing the palliative measures, individual and group interests overshadowed the interests of the targeted consumers thus undermining the effectiveness of the policy measures.

In the light of the foregoing, a number of lessons and policy implications can be drawn from Nigeria’s experience in managing the food crisis policy responses. First, the implementation of the NFCRP should have had provision for its continued implementation and for necessary review at a stipulated time. This should have made it impossible for policy makers and relevant actors to abandon the programme or starve it of necessary funds and political will to drive the process to a logical conclusion. The programme did not also emphasise the value chain approach which came up as an innovation in the National Food Security Programme Document prepared in 2009. Second, to (p.295) avoid the distortion of targeting for personal or political purposes, there is a need for high transparency regarding the process and conditions of distribution of resources (grains, credit, inputs, etc.) to identified target groups. Third, proper design and implementation of safety nets and other forms of support will improve with participation and consultation of key stakeholders. Therefore, a participatory approach should always be adopted when incentives are being designed to assist the farmers. Fourth, efforts should be made to intensify the registration of farmers across the country for proper targeting of support and inclusion of farmers in key decision-making processes from time to time.


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